NatWest, one of the largest financial institutions in the United Kingdom, is seeking to strengthen its lending firepower.
As part of the implementation of the mentioned aspirations, the specified bank, based in London, intends to conclude deals with investors to reduce some of its loan risks. Also, in the context of the corresponding decision, the financial institution plans to increase the amount of capital and preserve dividends. This was told to the media by the bank’s executives.
As part of its concept of activity, NatWest is focused on the United Kingdom market. Currently, 19% of the financial institution belongs to taxpayers.
It is worth noting that concluding deals with investors to reduce loan risks is a common practice among lenders. Also, such deals can reduce regulators’ capital requirements by hundreds of millions of pounds.
Robert Begbie, chief executive officer of NatWest’s Commercial & Institutional unit, during a conversation with the media, said that significant risk transfer transactions will stimulate new lending and help maintain payouts to shareholders. It is worth noting that in the past, the financial institution has already acted within the framework of this practice.
Risk transfer transactions allow lenders to shed lending risk to a third party through the use of derivatives or guarantees that protect the bank in the event of losses on loans.
Many financial institutions are currently exploring ways to mitigate new Basel rules that will impose higher risk weightings on certain loans from next year. Against this backdrop, lenders are forced to park more capital against those assets potentially squeezing access to credit for some borrowers.
As we have reported earlier, NatWest Introduces Mastercard Business Savings to UK Debit Cards.
